Were Queens ‘pioneering’ concessions legit?

-Brassington declines comment

Head of the Privatisation Unit, Winston Brassington yesterday declined comment on whether two of the ventures undertaken by Queens Atlantic Investment Inc (QAII) properly qualified as pioneering industries and were therefore eligible for tax breaks as asserted by President Bharrat Jagdeo.

Columnist Christopher Ram in his Business Page article in the last Sunday Stabroek pointed out that the two “pioneering” industries that were listed by President Jagdeo were not covered under the Income Tax (In Aid of Industry) Act.

Christopher RamThis legislation on which basis concessions were issued to two of the entity’s five subsidiaries says nothing about the “pioneering” industries that the President mentioned at the launching of the Guyana Times, one of the entity’s ventures. According to the President, the pharmaceutical research and development facility and the textile manufacturing facility, are the only two ventures to attract incentives but these are however not catered for in the Act.

Ram accused Government of deviating from legislation governing incentives and limits to these. Ram said the Minister of Finance has an obligation to the nation to say whether any Cabinet Paper had been submitted in his name recommending the concessions that QAII benefited from.

This newspaper also sought a comment from Minister of Finance Dr Ashni Singh who was unavailable for all of two days.

The issue has taken on added interest as the President made the disclosure at the launching of the newspaper while rebuking businessman Yesu Persaud over his call for similar concessions to be extended to others.

“This is one of the things I hope this newspaper will correct. This is a profound ignorance of the Tax Act,” Jagdeo said, arguing that the legislation provides for investors to benefit from tax concessions on the basis of investing in certain far-flung geographic locations, and in pioneering industries. He mentioned that when Persaud’s company was involved in medical transcription services, it benefited from tax concessions but that the project failed. “You are falling into the trap of ignorant people,” Jagdeo said.

The President then emphasised that the newspaper is not getting the benefit of duty- free concessions on its equipment and consumables. “The textile and anti-biotics [ventures] will get the tax holiday,” Jagdeo said.

“I have asked Winston Brassington to hold a seminar on the tax laws,” Jagdeo said, stating that Persaud should be one of the persons attending.

Ram in his column explained that the Income Tax (In Aid of Industry) Act gives the Minister of Finance discretionary powers to grant fiscal incentives in only two circumstances, and such concessions are limited to Section 6 of the Financial Administration and Audit Act which states that the said Minister must make subsidiary legislation to waive taxes conceded.

The Income Tax (In Aid of Industry) Act allows the Minister to grant concessions once the activity demonstrably creates new employment in one of the following regions: Region 1 – Barima/Waini; Region 8 – Cuyuni/Mazaruni; Region 9 – Upper Takutu – Upper Essequibo and Region 10 – Upper Demerara/Upper Berbice. Further, the activity will benefit from incentives once it is an economic one in one of the following fields: non-traditional agro-processing excluding sugar refining, rice milling and chicken farming; information and communication technology, excluding retail and distribution; petroleum exploration, expansion or refining; and tourist hotels and eco-tourist hotels.

QAII and its five different industrial ventures in the Sanata complex have benefited from a number of tax holidays and concessions.

Speaking to this newspaper yesterday, Dr Ranjisinghi Ramroop, Chairman and Managing Director of New GPC, for which QAII is parent company, said that in terms of concessions on duty and taxes on equipment, the company didn’t get anything that wasn’t automatically available to anyone investing in manufacturing. He disagrees with Ram on the pioneering industries and said that he didn’t feel there was anything further to be discussed on the issue.

At a press conference held in May by the Privatisation Unit, it was announced that the biotechnology project that QAII will be undertaking – a first in Guyana – will benefit from a five-year tax holiday and based on the performance of this venture, Government may award another five-year tax holiday at the expiry of the first.

This is the same for the textile venture. Customs duty, Excise Tax and VAT have been waived on all the QAII projects.

Government is also granting a waiver of withholding tax on the repayment of loans taken to finance the projects.

Speaking at that press conference, Head of the Guyana Office for Invest-ment, Geoffrey Da Silva had said that his agency was examining how Government can help with the fuel costs to QAII. Da Silva said too that the concessions granted include provision for unlimited losses carried forward and the repatriation of capital overseas. The investors are also allowed to open foreign currency bank accounts, he said.

Ram is of the view that the whole fiasco could have been avoided if the government had complied with Section 37 of the Investment Act of 2004 that requires the publication of fiscal incentives in the Official Gazette.

Negotiations

Observers have also questioned on what basis the Government commenced negotiations with QAII after no bids had been received.

Government is maintaining that the deal was made in accordance with the Privati-sation Policy Framework Paper (PRFP) of July 1993, where an entity has been advertised and no successful bids received, direct negotiations can be held with one of the unsuccessful bidders. But in reality no bids were received after the advertisement for the facility had been extended.

In mid 2007, a proposal to lease the complex was received from QAII and following detailed discussions and negotiations a paper submitted by the Privatisation Unit to the Privatisation Board on May 9, 2007 unanimously recommended approval of the proposal. Cabinet approved the recommendations of the Board in May of 2007.